09 August 2022 |

What’s next after the IRA?



  • Ideally, the U.S. passing the IRA will galvanize other countries the world over to follow suit. Australia already joined in last week, setting ambitious emissions reduction targets.
  • And there’s lots more to pay attention to later this year. COP27 will get lots of attention in the fall, but I wouldn’t hold my breath for significant breakthroughs.
  • Rather, more narrow legislation and efforts, such as new methane emissions rules in the U.S., are a better place to focus for impact.
  • Similarly, local measures, like banning gas hookups in new buildings, will hopefully be a source of more impact on the heels of the IRA.


Somehow, it’s already August. Which means in the blink of an eye, it’ll be autumn, then the holidays, and then we’ll be writing our end-of-year analyses on climate and climate tech and taking a look ahead at 2023.

Before that happens, let’s take a moment to center ourselves in this moment. For one, it’s very exciting that the IRA passed. It’s a big moment for public policy on climate, for the Biden admin, and for the U.S. as a world leader (for a change in this century). There are innumerable takes and articles on why it’s imperfect, many of which I’m sure I’d cosign, but that’s OK – that’s how the sausage gets made in Congress.

While the bill is forecast to impact U.S. emissions substantially, the U.S. isn’t the biggest emitter of greenhouse gasses in the world anymore. That title goes to China, which is expanding coal power usage significantly this year. Someday, sooner rather than later, in light of the IRA, some other country (probably India) will overtake the U.S. in the second position, too.

Still, the U.S. is responsible for the most cumulative greenhouse gas emissions. And someone’s gotta take the lead, lest all major emitters point fingers at each other for the next 5-10 decades.

Cumulative CO2 emissions from 1750 to 2020, by major country (gigatonnes)

True to its name, the Inflation Reduction Act should also improve lives in the U.S. Energy is the backbone of everything, from building new buildings (with steel, which requires a lot of energy to produce) or infrastructure (with concrete, which requires a lot of energy to make) to moving things around or powering the data centers that enable our increasingly internet-focused lives. The IRA will make energy cheaper and ideally do so in a reasonably equitable fashion.

OK. That’s all the time I’ll spend on that. Assuming the House does pass the bill, what are the next things we should be paying attention to in climate and climate tech for the rest of the year?

 #1. Copycats?

First and foremost, hopefully the U.S. ‘s  action galvanizes other global powers. Last week, Australia rolled out an ambitious target – to reduce its emissions 43% from 2005 levels by 2030. The legislation doesn’t include concrete proposals on how to accomplish the cuts like the IRA does, but it sets the course. And it’s a course that’s remarkably similar to the U.S.’s – analysts estimate the IRA puts the U.S. on track to reduce emissions 40% from 2005 levels by 2030.

Who else will follow suit? Europe certainly has little choice but to think about improving its energy resilience in coming years. Electricity prices are through the roof this summer, as Russia withholds natural gas supply and heat waves make households and businesses crank up the A/C.

In response? Spain instituted a new restriction on setting thermostats below 80°F. France threatened penalties for businesses that leave their doors open with the A/C on. Germany will likely keep nuclear reactors it planned on shuttering open longer to displace some dependence on gas. These are palliative measures; there are no short-term structural answers. 

For example, nuclear hawks who tout that new reactors could save everyone will be dismayed by the performance of France’s otherwise impressive nuclear fleet. With river waters warming in France, reactors are under strain because they don’t have enough cold water to keep reactors cool. On the flip side, Germany and Spain are two of the countries in the entire world that have made the most significant inroads in onboarding renewable energy capacity (at least relative to their size). And they’re struggling, too.

Hopefully, Europe and the rest of the world will greenlight aggressive spending to make cheaper, cleaner energy and electricity. 

Beyond Europe, the wildcard, of course, is the world’s #1 emitter, China. Before anyone focuses too exclusively on their coal use and headline footprint, it’s worth noting that they’ve built far more renewable energy capacity than anyone in recent years. While they broke off climate discussions with the U.S. after Nancy Pelosi visited Taiwan, they’re pushing forward on their own. Not because it’s good for the world per se, but because it’s good for them! 

#2. COP 27

In November, Egypt will host the annual United Nations Climate Change Conference (commonly called ‘COP’). There are two schools of thought on these conferences. In some people’s minds, they advance essential policies. The Paris Agreement from 2015 is one such example – the much-referenced agreement set a goal of limiting global warming to well below 2° C.

Other people think these conferences are a complete farce. For one, the world is already 1.2° C warmer than it was before the Industrial Revolution. Keeping warming at 1.5° C or even below 2° C is unlikely given current trajectories. The IRA in the U.S. is one of, if not the most meaningful, step in the right direction from a major player, and it’s coming seven years after the COP 21 conference where the Paris Agreement was established.

It’s hard to say how much the Paris Agreement has helped the world progress towards mitigating climate change. The conversation is there. And that’s important. But I’m not holding my breath for the COP conference this year. One agreement from last year’s conference, a $500M deal to protect ecosystems in the Democratic Republic of Congo, clearly hasn’t been that effective, considering that the Congolese government is auctioning off big whacks of land in important rainforests and peat bogs to oil & gas companies

#3 EPA Methane emissions rules

I’ve written about this topic a bit of late. Now, let’s tackle it head-on right now. Because while it might seem like it pales compared to other headline grabbers listed above, it really doesn’t.

Here’s a quick breakdown of why:

  • The U.S. was the #1 emitter of methane in the first half of 2022
  • Methane accounts for around 25% to 30% of global warming.
  • The IRA includes the first-of-its-kind penalty for methane emissions from certain facilities. This is the closest thing to a price on a greenhouse gas we’ve seen anywhere at scale.
  • In parallel to and separate from the IRA, the EPA, at the behest of President Biden, is working on new rules for flaring and pigging, two practices that allow methane to leak into the atmosphere and regulations, and new monitoring standards for methane emissions from oil & gas sites.
  • In the private sector, new technologies are also coming online to monitor methane emissions. For instance, QLM raised a Series A last week for their new LiDAR-based technology that can detect methane leaks and analyze flaring efficiency, i.e., how much methane flares successfully burn off vs. how much is escaping into the atmosphere.

To summarize, there’s an ample opportunity to slow global warming, even just in the U.S. alone, by tackling methane emissions. This isn’t just an oil & gas problem, either. Methane emissions and leaks also come from agriculture (primarily), landfills, and homes and businesses in cities

Understanding whether better monitoring and penalties work to reduce these emissions will have significant implications for implementing such practices elsewhere.

#4 The climate for climate fundraising

Compared to public markets and the venture capital fundraising climate for other start-ups, start-ups under the broad climate umbrella have fared reasonably well. Deals are still getting done; while headline numbers may be coming in a bit, on the whole, there’s still plenty of deal activity any week, and numbers for the year so far are solid.

Part of the reason for this is the significant amount of dedicated capital committed to climate-focused funds in recent months and years. Climate has also kept its mojo while funding in other areas dries up – the amount of private equity and 9-figure rounds tells me it’s becoming a safer haven for bigger, later-stage funds to pour money into as other sectors cool. 

Why? Well, the IRA is the perfect example. Climate is a sector, or a variety of sectors loosely coupled, that investors see as a good long-term bet considering the amount of attention across the private and public sector paid to it right now. 

#5 Other ideas

Ideally, the IRA will also produce a groundswell of local climate policy in the U.S. Some examples of stuff that’s already in the works include:

In another vein, expect renewable energy project orders to expand significantly, both in number and, at times, in size. Order sizes for new solar and wind farms are already increasing significantly. Provided they can get the parts they need amidst ongoing supply chain disruptions, project developers in the U.S. will be busy. As we’ve discussed a lot recently, this will require more transmission (and energy storage) to make full use of all the renewable capacity coming online.

Finally, the chorus of naysayers (especially on the internet) will intensify. Now that the U.S. is on the path to adopting climate solutions at scale, there’ll be loads of whataboutism, ranging from ‘what about the metals in E.V. batteries’ to ‘what about wind farms killing birds?’

The answer to most of these types of points? They’re valid. Everything includes tradeoffs. But the impacts in question often pale compared to the impact fossil fuel extraction and combustion have on the world. 

Today’s electric and climate technologies aren’t perfect. There’s lots more to be done to make our economies more circular, equitable, clean, and efficient. But that doesn’t make them bad, especially when honest analysis shows they often are cleaner, cheaper, and rank well on performance compared to their predecessor, fossil-fuel-fired or based technologies.